Ideal Power Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Ideal Power is focused on developing and commercializing its B-TRAN solid-state switch technology. Revenue to date has largely been grant revenue and revenue from discontinued operations; the company reported grant revenue only in the quarter.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Grant revenue | $125,008 | $242,061 |
| Cost of grant revenue / gross profit | $125,008 / $0 | $242,061 / $0 |
| Research and development | $828,547 | $260,880 |
| General and administrative | $852,949 | $600,686 |
| Sales and marketing | $219,429 | $62,578 |
| Operating loss | $(1,900,925) | $(924,144) |
| Net loss | $(1,904,641) | $(924,150) |
| Net loss per share, basic and diluted | $(0.31) | $(0.17) |
| Operating cash used | $(1,417,123) | $(843,337) |
| Cash and cash equivalents, quarter-end | $21,725,410 | $26,789,017 |
There was no gross profit because grant costs equaled grant revenue. No commercial revenue was reported. The filing gives no operating margin; grant gross margin was zero. Investing cash outflow was $27,616, and financing cash flow was zero in Q1 2022. The company reported $22.1 million of current assets, $756,083 of current liabilities, and $21.4 million of net working capital. Total liabilities were $1.93 million, principally lease and licensing liabilities; the company reported no outstanding debt.
Changes versus Q1 2021
- Revenue declined 48% to $125,008, while net loss more than doubled to $1.90 million.
- Operating expenses rose to $1.90 million, led by higher R&D spending, including semiconductor fabrication, and increased G&A and sales and marketing costs.
- Operating cash use increased to $1.42 million. Unlike Q1 2021, when the company received $24.5 million from an offering and option and warrant exercises, there were no financing inflows in Q1 2022.
- Cash declined $1.44 million during the quarter, from $23.17 million at December 31, 2021.
Outlook, risks and notable items
- Management said cash was expected to fund activities for at least 12 months from the filing date, while noting additional funding might be needed to fully implement its operating plan. The company has incurred losses since inception and relies on financing and other potential funding sources.
- Management expected to introduce its initial commercial product in late 2022, but commercial revenue depended on the launch date. It expected NAVSEA-related grant revenue to continue into the next quarter, with minimal revenue thereafter through completion of the demonstration; it expected no gross profit on grants.
- Management forecast higher R&D and sales and marketing expense, and higher operating cash outflows, during the remainder of 2022 as development and commercialization efforts accelerated. G&A was expected to be flat to slightly lower.
- Key risks include successful B-TRAN development and commercialization, customer adoption and product testing and certification, fabrication capacity and semiconductor supply constraints, and the ability to raise capital. COVID-19 had not materially adversely affected operations to date, but future supply-chain and financing effects remained uncertain.
- Q1 included $100,100 of stock issued to a vendor for services and $49,327 of compensation expense from modifying a former chairman’s vested option exercise period. The filing reported no current legal proceedings and no material changes to previously disclosed risk factors.
- Disclosure controls and procedures were assessed as effective as of March 31, 2022; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether the planned late-2022 product launch occurred and whether commercialization generated revenue or customer commitments.
- Progress, timing, and remaining milestones for the NAVSEA demonstration and any additional government grants or strategic partnerships.
- Cash burn and runway as development, fabrication, and commercialization spending increase; the company’s need and ability to obtain further financing.
- Current semiconductor fabrication availability, supply-chain constraints, and their effect on development schedules and costs.
- Potential dilution: 1,382,402 potentially dilutive shares were disclosed at March 31, 2022, excluding pre-funded warrants; the filing reported weighted-average shares of 6,155,352 for Q1 2022.